Congress Closer to Shutdown After Senate Democrats Stand in the Way of GOP Attempts to Delay Obamacare

The US Senate rejected an attempt by the House of Representatives to make the continued funding of the federal government contingent upon a one-year delay to Barack Obama's healthcare reforms on Monday, forcing Republicans to decide whether they would trigger a government shutdown by pressing on with their high-stakes attempts to hobble the law.

Just after 2pm, senators voted largely along party lines, by 52 votes to 46, to strip the provisions relating to the Affordable Care Act from the resolution passed early on Sunday morning by the House of Representatives.

House Republicans were meeting on Monday afternoon to contemplate their next move.

Amid the deadlock, the financial markets all ended the day down. The Dow Jones Industrial Average closed down by more than 128 points (0.84%), the Standard and Poor 500 index and the Nasdaq exchange were also down by the end of the day.

The White House appeared to offer a tentative olive branch, announcing that President Obama would meet the speaker of the House of Representatives, John Boehner, to discuss the budget impasse. Obama had previously refused to hold any negotiations over what the administration insists is a blackmail strategy by House conservatives.  

"I am not only open to, but eager to have negotiations around a long-term budget," said Obama, adding that any discussion needed to be "in good faith" and without threats.

But Obama refused to contemplate any attempt to link his healthcare reforms, which start to take effect on Tuesday, and a separate Republican threat to block the government's borrowing authorisation, also known as the debt ceiling, which needs to be negotiated by 17 October. Without a debt ceiling deal, the US government could fail to meet its debts. "Certainly we can't have any meaningful negotiations under the cloud of potential default – the first in US history," Obama said.

If a budget deal is not reached by midnight, about 800,000 workers at government agencies such as national parks, museums, the tax-collection service and Nasa will be sent home.

The standoff has pitched Tea Party-backed Republicans against both Obama and their more moderate Republican colleagues. The former Republican presidential candidate, senator John McCain, called on conservatives to accept they lost the fight against the Affordable Care Act, also known as Obamacare, when it passed both houses of Congress and was signed into law in 2010.

At the weekend, the Republican-controlled House of Representatives passed a resolution that made funding the government until the middle of December contingent upon a one-year delay of the Affordable Care Act. On Monday, the Democrat-controlled Senate was expected to strip out the healthcare law rider and send back a "clean" budget bill to the House. 

The game of congressional ping-pong was expected to intensify with a proposal to send back to the Senate a budget resolution with only one healthcare-related amendment, which would prevent lawmakers and their staff from enjoying a healthcare subsidy under the Affordable Care Act. 

Boehner calculated that senators would find it hard to block a budget resolution that contained only this rider relating to Obamacare, as they would risk being seen to precipitate a government shutdown in order to protect their own perks.

But House conservatives have consistently blocked Boehner's tactics in recent days. Some wanted to push for the House to take a harder line and pass a resolution that would more fully dismantle the healthcare law.

Either way, Reid and Obama – who have insisted they will only pass a clean budget resolution – appeared determined to stand their ground, believing that US public opinion will continue to largely blame Republicans for the predicament. History would appear to back the administration's judgement: shutdowns in December 1995 and January 1996 were largely blamed on Republicans, who controlled the House of Represenatives at the time, and helped President Bill Clinton.

Obama has stepped up his rhetoric in recent days, accusing the Republicans of holding the government to ransom over a law that has nothing to do with the budget, and that has already been passed by both branches of Congress.

If a deal was not reached midnight, the shutdown would begin at midnight and affect all federal employees not deemed to be "essential" by the White House office of budget management.

Asked if he thought a shutdown was now inevitable, Richard Durbin, the second most senior Democrat in the Senate, said on Sunday: "I'm afraid I do." Durbin told CBS's Face the Nation that he was open to negotiating over the tax on medical devices, "but not with a gun to my head, not with the prospect of shutting down the government".

Jack Ablin, chief investment officer at BMO private bank, said on Monday that the row was likely to have serious consequences for the wider economy. "This is a contrived crisis that is going to have real conseq ences," said Ablin. "It will cause unnecessary volatility in the market and ultimately cost the economy."

Even if a deal is done over the budget, a more serious crisis looms as Congress begins negotiations over raising the US's $16.7tn borrowing limit. Without an agreement, treasury secretary Jack Lew has warned that the federal government will run out of money by 17 October and be unable to meet most of its obligations.The last row over the debt ceiling in 2011 led to a downgrade of US debt and panic on stock marketsworldwide.

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